Attack on the BA, Part 2

by Andrew Gillen

The first response to Murray is by Pedro Carneiro, titled If the BA Is the Work of the Devil, It’s Not His Best Work

Carneiro:

Murray gives us a simple argument. For most people, completing a BA is a bad investment... In spite of this, a large share of the American youth aspires to get a BA, either because of strong social pressure to get a BA, or the illusion that the BA pays off for everyone in the labor market.

There’s nothing wrong with the logic of this argument… but for the most part it seems exaggerated.

Economists have been estimating the rate of return to investments in education for over 50 years… It is well accepted that in the U.S. this increase in earnings is, on average, not much lower than 10% per year of schooling… If this is true, education is a very productive investment...

Recent research shows that, empirically, the expected rate of return to college varies widely across individuals: As we expand college attendance we attract individuals who are increasingly less suitable to attend college, and who have lower expected returns to college than the ones who are already there. Nevertheless, these studies also show that most people can expect a relatively high return to college. Even if we take the most pessimistic estimates for the return to education for those outside the elite (whom economists would call the marginal students), they are probably above 7% per year of college…

So, what’s the punch line? Murray is correct in stating that a BA is not for everyone, and may be right in saying that some people are wasting their time getting a BA, but for most of the population I doubt that the case he is making is of great importance. As he says, firms are not stupid, and will not pay for a BA degree if a BA is not teaching anything to their potential recruits. Similarly, I believe that individuals make mistakes, but at this level they are probably not as serious as Murray is implying. For most of those enrolling in college, a BA has a good expected return, but there is some risk…

Do we really think that social pressure to get a BA, and misinformation about the value of a BA, will induce generations of youth (and their parents!) to systematically engage in bad education decisions? Why would they be doing that over and over again, if it was such a bad investment?...

for the cohorts born after 1950 there is a dramatic stagnation in education attainment…This stagnation occurred in spite of enormous increases in the returns to college in the 1980s and 1990s. So it may be that Murray’s contention that individuals are not responding to economic incentives is true, but if anything it is because they, or their parents, underestimate the value of education...

Up next Bryan Caplan.